What is the auditor's responsibility in assessing the risk of material misstatement for Floyds 99?
Floyds_99 Franchise · 2025 FDDAnswer from 2025 FDD Document
In performing audits in accordance with GAAS, we:
- Exercise professional judgment and maintain professional skepticism throughout the audits.
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
- Obtain an understanding of internal control relevant to the audits in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits, significant audit findings, and certain internal control-related matters that we identified during the audits.
Source: Item 23 — RECEIPT (FDD pages 58–229)
What This Means (2025 FDD)
According to the 2025 FDD, the auditor's responsibilities when assessing the risk of material misstatement in Floyds 99's financial statements include identifying and assessing these risks, whether they are due to fraud or error. The auditor designs and performs audit procedures that respond to the identified risks, including examining evidence related to the amounts and disclosures in the financial statements on a test basis.
The auditor must obtain an understanding of Floyds 99's internal control relevant to the audit to design appropriate audit procedures, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. The auditor evaluates the appropriateness of the accounting policies used and the reasonableness of significant accounting estimates made by management, as well as the overall presentation of the financial statements.
Furthermore, the auditor determines whether there are conditions or events that raise substantial doubt about Floyds 99's ability to continue as a going concern for a reasonable period. The auditor exercises professional judgment and maintains professional skepticism throughout the audit. The auditor is also required to communicate with those charged with governance regarding the planned scope and timing of the audits, significant audit findings, and certain internal control-related matters identified during the audits.